Summary |
The increased involvement of the IMF in governance issues has been facilitated by the growing consensus in the economics profession and in the international community at large on the adverse effects of corruption on economic performance. Recent empirical research, including that presented in this volume, documents the detrimental impact of corruption on economic growth, inflation, public finances, investment, poverty, and the provision of social services. in particular, studies demonstrate how weak and poorly run institutions fall prey to vested interests which, in effect “capture the state” and then use their power to preserve monopolies and extract rent, hinder completion, and inhibit economic reform. Corruption is equally damaging when those in positions of authority exploit their public trust to achieve personal gain. Such practices not only impose additional taxes on the economy, they also undermine the rule of law, which is essential to the proper functioning of a market economy.
The global consensus on the importance of good governance can be effective only on the basis of the increased willingness and commitment of authorities to foster a transparent and accountable system of government at the national level. The IMF has always been ready to work with member countries to identify ways to reduce the risks of mismanagement and corruption in its areas of expertise. A case in point is the heavily indebted poor countries, where the IMF is working closely with the World Bank and national governments to ensure that additional spending, facilitated by the recently launched initiative to reduce their debt burdens, is channeled into programs that reduce poverty. This requires that concerted efforts be made to strengthen institutional reforms, especially in the areas of public expenditure management.
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